Canada’s Enbridge in Talks with Alaska on Natural Gas Pipeline

Chester Dawson broke the news that Canadian pipeline company Enbridge was talking to the state of Alaska to ship natural gas from the North Slope.

The story as it appeared on Dow Jones:
July 10, 2014, 9:03 AM EDT: Canada’s Enbridge in Talks with Alaska on Natural Gas Pipeline

By Chester Dawson

CALGARY, Alberta– Enbridge Inc. is in talks with Alaska about building a pipeline to ship natural gas from the North Slope, according to company and state officials, who describe the project as a potential alternative to an Alaskan pipeline project backed by Canadian rival TransCanada Corp.

The state is eyeing the competing projects to carry surplus natural gas from the North Slope, either to meet demand in-state through the existing utility grid or to reach foreign buyers once the gas is liquefied for transport by ship.

Calgary-based Enbridge said it has begun discussions with Alaska Gasline Development Corp., a state-funded body tasked with developing a 727-mile natural-gas pipe from Prudhoe Bay to Point MacKenzie, with a spur line to Fairbanks.

“It’s an area of interest for us and we’re having discussions,” Enbridge Chief Executive Al Monaco said.

As currently envisioned by Alaska, the proposed $7.7 billion project would carry about 500 million cubic feet of gas a day and aim to start up by late 2020. It would mostly serve to offset declining gas production from the Cook Inlet.

AGDC’s board agreed in May to talk exclusively with Enbridge to gauge its interest in becoming an “owner/builder/operator” of the pipeline, for which the state has already earmarked $400 million for initial planning.

Alaska is weighing the project as a backup if a competing proposal from TransCanada doesn’t move ahead. That larger project could cost up to $65 billion and includes a liquefaction terminal to process gas for export by 2025.

This month Alaska signed a joint-venture agreement with TransCanada, Exxon Mobil Corp., BP PLC and ConocoPhillips Co. to begin preliminary engineering and design work on the liquefied natural gas-linked pipeline.

“The state of Alaska has made a decision that it wants to continue to pursue both projects [for now], but we fully expect only one project to get built,” said Miles Baker, AGDC’s Director of Government Relations and External Affairs.

The two options grew out of the collapse of a multiyear effort to reach an agreement for piping North Slope gas to the lower 48 states via Canada. That initiative fell victim to the North American shale gas boom, which has cut prices for natural gas and made it uneconomic to ship natural gas by pipeline from Alaska.

Mr. Baker said Enbridge is expected to make a decision on whether to sponsor the smaller gas pipeline by year’s end and that Alaska hopes to conclude an open season to gauge shipper interest in that project by mid-2015.

The prospective shippers are the main producers on Alaska’s North Slope: Exxon Mobil, BP and ConocoPhillips.

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